Bag Fee Revenue Rises 33% in 1Q

Roger Yu, USA TODAY On Jun 29, 2010

U.S. airlines' windfall from baggage fees shot up 33% in the first three months of this year compared with last, the Transportation Department reported Monday.

Revenue from fees charged to passengers to check their bags climbed to $769 million compared with $578 million collected in the first quarter of last year, the department's Bureau of Transportation Statistics said.

The airlines also collected $554 million in fees to change reservations and $534 million from other "ancillary" services, including sales of frequent-flier miles and fees to fly pets.

The first-quarter income of $1.86 billion from all ancillary sources doesn't include the sale of food and drinks, pillows, blankets and on-flight entertainment or fees charged for seat assignments. And while revenue from bag fees was up, the industry's overall ancillary revenue remained largely flat compared with the first quarter of last year.

The trend, analysts say, indicates passengers are increasingly willing to pay some fees and that the airlines aren't about to abandon the fees -- regardless of how unpopular they are with travelers.

"This has become a billion-dollar industry," says Anne Banas, executive editor of SmarterTravel. "This is clearly working for the airlines. And they're not going away anytime soon."

She says travelers are demonstrating they'll pay for services they consider essential, such as checking bags. But they'll avoid paying extra for such things as changing reservations just to get home a couple of hours early.

Delta, the world's largest airline following its merger with Northwest, took in the most ancillary revenue, $592 million, in the first quarter. Spirit Airlines, the small carrier that led the way in charging passengers extra for services that used to be included in the ticket price, got more than a fifth of its operating revenue, 21.7%, from ancillary sources, the largest percentage in the industry.

The fees helped the industry -- comprising 21 airlines measured by the department -- to eke out $12 million in operating profit in the first quarter.